India’s tea industry needs policy liberalization for rejuvenation

Source– The post is based on the article “India’s tea industry needs policy liberalization for rejuvenation” published in the “mint” on 18th September 2023.

Syllabus: GS3 – Indian Economy – Issues related to industrial policies

News– The article explains the status of the tea industry in India and issues faced by it.

What are some statistics related to the tea industry?

The Indian tea industry holds a significant position on the global stage. It ranks as the second-largest tea producer worldwide.

The annual production of tea is 1.3 million tonnes. India is the third-largest exporter. It is generating approximately $1 billion in revenue each year.

What are the issues faced by the tea industry?

Approximately 85% of the tea produced is consumed domestically. India’s per capita tea consumption is around 800 grams per year. It is one of the lowest in the world.

India does not produce some of the newer tea categories, such as Kenyan yellow tea, which has gained popularity as a recent trend.

Exports of tea have remained stagnant. The tea industry has faced downward price pressures.

The number and acreage of large, regulated tea growers have either remained static or declined. Their market share has decreased from 60% to below 50% at present.

The current highly regulated Tea Growers (RTG) model is outdated. Statutory requirements mandating labour housing, schooling, and various other facilities on the tea estate are no longer necessary or cost-effective.

The existing tea auction model compels the transportation of tea to a limited number of auction centres and involves multiple cumbersome processes.

This model not only consumes time but also adds an unnecessary cost of approximately ₹7-10 per kilogram to the tea sold. It results in a significant volume of unsold stocks. Only about 40% of the total tea production is sold through tea auctions.

Way forward for tea industry

Standardization and Classification: There is a pressing need for standardization and classification of tea in India. Currently, there are reportedly around 800 types of tea manufactured or sold in the country.

Promoting Tea as a Health Drink: Rather than focusing solely on supply, there should be a concerted effort to promote tea as a healthy beverage.

Conversion of the Tea Board: The Tea Board should undergo a transformation into an entity dedicated to promoting tea consumption and exports. There is a need to relinquish its regulatory powers.

Industry-Managed Voluntary Tea Auction Centers: The existing tea auction houses can be reimagined as voluntary tea auction centres managed by the industry. Tea producers interested in selling their products can do so voluntarily by paying a fee.

Establishment of Standardization Agencies: There is a need for establishment of agencies tasked with developing and standardizing norms for the tea industry, following the model of the Indian Standards Institution (ISI).

These agencies should also handle promotion and certification, like the functions of the Agricultural and Processed Food Products Export Development Authority (APEDA).

Diverse Marketing Channels: Indian tea should be permitted to be marketed freely through various global channels, including direct sales, e-commerce, tea auction houses, commodity exchanges, and more.

Other reforms: There is a need to modernize the RTG Tea-Estate Model and revamp the Tea Auction Model.

It is now opportune to transform the Indian Tea Act of 1954, shifting its focus from regulation to a developmental and facilitative approach.

All the existing mandates, such as compulsory labour housing and the mandatory requirement of selling 50% of tea through auction houses, should be eliminated.